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View Full Version : Tax Question: What if a Customer refuses to pay Sales Tax?


Paradise Landscapes
05-30-2003, 08:14 PM
I ran into a situation the other day.
The homeowner refused to pay the Ohio sales Tax.

I would like to open up this thread to see the input you fellow LCO's and Landscapers have to offer. What would you do? :rolleyes:

Meier
05-30-2003, 08:21 PM
I had one about amonth ago who didn't want to pay sales tax. I explained that I didn't want to collect it, but if I didn't and the state comptroller ever asked me about what I'd been doing the last few years, I'd have to pay it all myself, along with interest and penalties.

I just explained that sales tax was unavoidable.

She signed up.

Later,
DFW, TX

Lawn Tek
05-30-2003, 08:23 PM
Ask him why he is exempt ? I f he refused to pay it then he did not pay his bill in full to you . Assuming your gonna pay HIS tax , makes him still owing you .

Paradise Landscapes
05-30-2003, 08:31 PM
I contacted the IRS. Same thing happened Last Year. I reported them, they came and took some of thier property. They thought I was bluffing when I told them I would call the IRS. They found out wrong when the IRS showed up.

Lesson: Don't try to cheat the IRS. :cool:

Paradise Landscapes
05-30-2003, 08:36 PM
Lawn Tek,

Good Point. I asked him why he thinks he is Exemped. All he could say is becauase more material was used than what was originally stated, Thinking I should take the Tax hit on the material.

philk17088
05-30-2003, 09:33 PM
Tell him to call the state and give them that bogus reason, they'll staighten him out!

greenman
05-31-2003, 12:10 AM
Dont show the tax on the invoice. When you charge the client "your price" (your cost plus your mark up), add the tax in with the cost (hidden tax). My invoices dont have a "sales tax" line. Just a "charge" lines and "total" line. If you dont pay tax at purchase to the seller then it may difficult to do this though. I pay my taxes when I purchase, so the taxes are already in "my price" when I quote the bid or total price.

John from OH
05-31-2003, 09:02 AM
Paradise, did you list the sales tax in your contract? We always put the price, sales tax, and a grand total on our contracts. Those details clarify any misunderstanding the customer has about the final price of any job.

As I read your posts, 2 things come to mind.

First, you state that the materials were more than you quoted him. Was this a time and materials job (T and M jobs still state sales tax will be charged on the job), or did you miscalculate materials and try to pass on your mistake to the customer?

Second, you state that last year the same thing happened and you turned the client into the IRS. The IRS doesn't collect sales tax. Sales Tax is a state collected tax. The IRS is responsible for income tax, employment tax, etc.

Give more details and maybe we can give you applicable advice. How much is the sales tax? Is it worth the trouble of collecting it?

John Allin
05-31-2003, 10:20 AM
We have a nice relationship with the State Revenue people here in our local market. If we have any questions, we call them for clarification..... they really are quite friendly since they know we are really trying to follow the state tax laws.

Anyway, one of the "services" we get is when a customer gives us a hard time about what might be taxable, and what is not (translation.... refusing to pay sales tax) - they will gladly make a phone call to our client "explaining" the tax law to them and what the ramifications are for refusing to pay.

They do it professionally, and without malice..... but the point DOES get across to the client..... and we always get the money.

Paradise Landscapes
05-31-2003, 11:02 AM
I was trying to pass my mistake to the customer. I wanted to eat my mistake and have the customer pay the sales tax.

I did have my sales tax on a seperate line.

Example: Materials:XXXXXX
Labor: XXXXXX
SALES TAX XXXXXX
Total: XXXXXXX

Paradise Landscapes
05-31-2003, 11:06 AM
John from OH,

when I mentioned about the IRS, I meant to say the state collected tax.

Paradise Landscapes
05-31-2003, 11:08 AM
State Sales tax came to about 65.00

Green in Idaho
05-31-2003, 05:06 PM
Paradise, Did you install landscaping or did you provide service like mowing>

Paradise Landscapes
06-01-2003, 08:57 AM
Everything EXEPT for Irrigation, Landscape Lighting and heavy tree work.:cool:

Paradise Landscapes
06-01-2003, 08:59 AM
That was a Landscape Job. I had to use a small bobcat to level out the area and bring in soil, seed and straw it.

Green in Idaho
06-01-2003, 01:45 PM
After cruising the sales tax rules for Ohio, I see landscaping is a taxable transaction just like any retail sale.

So you are responsible for the tax if the customer doesn't pay you. It is as mentioned above, they still owe you IF you are within the terms of the contract.

Good luck.

Meier
06-01-2003, 01:56 PM
If you have a customer who says they won't pay sales tax before you do the work, don't do it. Or you can drop your price by the amount of the sales tax if you need the business.

If you have a customer who won't pay the sales tax after you've done the work and sent them an invoice, either drop them because they're a PIA or, if you really need the business, cut your price such that the sales tax is included.

If it's a one time landscaping job you've already done, and now the customer won't pay the sales tax, simply don't report the sales tax to the state...you didn't collect it. The customer will still owe the sales tax, but you won't be out any money unless you send the sales tax that was uncollectible to the state. The state of Texas and probably every other state in the union doesn't require a business operator to send uncollected sales taxes to them. You're only required to send them sales tax collected.

If the state ever audits you and asks about this, explain that the customer wouldn't voluntarily pay you the sales tax. It's then the state's responsibility to collect it from the customer, not you. And they're probably not going to bother.

Later,
DFW, TX

tailoredlook
06-01-2003, 07:32 PM
Ijust include sales tax in my pricing, that way the customer pays it without even knowing about it.

Green in Idaho
06-01-2003, 07:51 PM
Originally posted by Meier
The state of Texas and probably every other state in the union doesn't require a business operator to send uncollected sales taxes to them. You're only required to send them sales tax collected.

If the state ever audits you and asks about this, explain that the customer wouldn't voluntarily pay you the sales tax. It's then the state's responsibility to collect it from the customer, not you. DFW, TX

As a former state tax agency employee I can attest that is not always the case. If a seller does not collect tax it is becomes the seller's responsibility to caugh it up. Auditors can pursue the customer, but that is much too hassle rather than adding it the seller's audit adjustment. If the nonpayer is another business their name may be added to a future audit list to seek use tax. But the safe play is the seller collects- it is part of the sales contract.

Paradise Landscapes
06-04-2003, 04:42 AM
Another Landscape Job came again today. I do not want to low ball on anything so I raised My rates 8% above the wholesale rates of LCN.
(LCN is Lake County Nursery) The job total is about 2,300.00 before Labor.

Do you double the amount of all costs to do the Job?

I was thinking of measuring my hours to something like this:

10hrs-day X 75.00Hr = 750.00 per day
OR
10hrs-day X 60.00Hr = 600.00 per day

I learned alot. I was thinking of adding a few dollars more to cover sales tax to hide the sales tax like GREENMAN mentioned.

A part of me says to try that, another says to put everything as a seperate line. Mind boogling. :dizzy:

I don't want to under bid myself with my calculation!
Low balling: It hurts our markets, Hurts us all when we do it. And
I have recently felt it's effects.:cry: :cry: :cry:

Georgiehopper
06-04-2003, 07:17 AM
I stopped showing sales tax on invoices a long time ago. Many customers don't want to pay for sales tax and things like equipment usage and disposal too.

I give them one price...which is the charge for doing the job. The tax and everything else is worked into that price. If a customer ever asks, I tell them the tax is included.....most don't ask though.

Paradise Landscapes
06-04-2003, 07:40 AM
I'll try doing that on this job.

greenman
06-04-2003, 09:18 AM
Originally posted by Georgiehopper
I stopped showing sales tax on invoices a long time ago. Many customers don't want to pay for sales tax and things like equipment usage and disposal too.

I give them one price...which is the charge for doing the job. The tax and everything else is worked into that price. If a customer ever asks, I tell them the tax is included.....most don't ask though.

Ditto! It's a hidden tax.

AztlanLC
06-04-2003, 12:19 PM
It would be a pita for me, because all my invoices show the sales tax, and quickbooks keeps track of it.

I alwasy give my prices and tell customes + Tax, cause just this month our sales Tax went up from 8% to 8.25% same last year, if I quote someone $35.00 for mowing I don't want to adjust my invoice every month to make sure it adds up to $35 with sales tax, don't be afraid of show your sales tax, because someone here said it before "I don't charge sales tax I just collect'em"

Green in Idaho
06-04-2003, 11:19 PM
I'm SURE your taxing authority will want the sales tax to be separately stated. Or at least be able to identify the tax base.

Darryl G
06-08-2003, 12:05 AM
I have a couple of customers who pay cash and think that means they don't have to pay sales tax.

I just include the tax in the price for those customers. So if it's a $40 job, I record it at $37.73 plus 6% tax, bringing it to $40. Kind of a cash discount if you will.